At PJM, prefabricated substations might speed up interconnecting renewables
PJM is pursuing generator interconnection reforms to file at FERC in early 2022. PJM had three stakeholder meetings in October alone. In addition to learning from MISO’s experience, PJM should work with its transmission owners to build substations where renewables connect to the transmission grid. Prefabricated substations are readily available from some of the leading equipment manufacturers.
Incentivize Transmission owners to use prefabricated substations to meet corporate buyers’ renewable policy goals. In situations where delays occur, the renewable developers must have the option to hire private contractors to install prefabricated substations.
Current queue reform process at PJM
PJM plans to file the new Federal Energy Regulatory Commission (FERC) tariff for an improved generator interconnection process in the first quarter of 2022. PJM has a couple of options on the menu for stakeholders to choose from for projects currently sitting in the queue waiting for study results. Most PJM members prefer Alternate Transition option #3 (slide 11) – multiple transition cycles for projects in AE (2019) and beyond. PJM also proposed to stop accepting new applications in 2023 to process projects submitted in 2021 (AG).
If most PJM members prefer PJM’s Alternate Transition option #3, the majority of stakeholders voted for renewable developer Geenex Coalition and Open Road Renewables (“ORR”) proposed options. ORR’s proposed solution resonates with developers because it provides current cost allocation certainty for projects in the AG1 and earlier cycle.
Geenex Coalition (includes Clearway and Community Energy) proposes PJM transition current projects in serial and cluster manner. The serial nature of queue studies gives more weight to who was in the queue first than others, whereas the cluster nature groups all projects received by a certain date. None of these proposals, including PJM’s, mention the weakest link in the renewable project interconnection – transmission owners construction delays.
Transmission Owners construction delays are next
If PJM can process 400-500 projects annually on their end, the transmission owners can only construct 55-80 per year. Once PJM processes study results and signs interconnection agreements with the developers and transmission owners, the emphasis is on the transmission owner to construct the needed network upgrades to interconnect the renewable project.
Many renewable projects spend a significant amount of time waiting at this last construction stage because the transmission owner needs PJM’s approval to schedule a transmission outage to connect a new substation that would tap an existing transmission line. The current queue transition proposals do not discuss scheduling transmission line outages to interconnect renewable projects.
With an “option to build,” the developer can construct a new substation with the pre-approval of the interconnecting transmission owner (TO). However, most TOs don’t recommend this option even though they have posted a list of approved contractors on PJM’s website. If interconnection customers use these pre-approved contractors, TOs must be comfortable with the substation construction.
Prefabricated substations are a possible solution
Developers don’t have enough visibility into TO construction delays on the PJM website. PJM projects rarely meet an in-service date written in the interconnection agreement. Prefabricated (“prefab”) substations can avoid in-service date delays. Interconnection customers should have the option to hire contractors to install a prefab substation once a TO delays an in-service date by more than a year.
Delayed renewable projects are not news anymore. But what would be news in the future is the repercussions in the renewable projects Power Purchase Agreement (PPA) market once the industry realizes construction delays on the PJM TO end could lead to multiple corporate buyers of renewable energy missing their announced deadlines to meet carbon goals.
PJM is unique because of the capacity market compared to MISO and SPP
PJM’s capacity market is one of the most lucrative markets in the US. Renewable PPAs would impact future capacity prices at PJM once financial investment firms investing in developers realize the delays in in-service dates. This likely turmoil in future PJM’s capacity prices can be avoided now by shedding some light on TO construction delays.
PJM is attempting something that neither MISO nor SPP have done so far. PJM is attempting to transition a queue that already has more than 600 project requests per year, and clear the past backlog of studies, and file a new cluster-based process moving away from serial-based.
PJM is unique because both MISO and SPP dealt with wind projects in the past, and now they are dealing with solar. But PJM is dealing with large volumes of solar right off the bat, and PJM’s capacity market has higher visibility than MISO’s voluntary capacity auction. And, let’s not forget that even though both MISO and SPP have experience with model building and queue backlogs, they continue to face study delays.
If PJM wants to avoid current MISO and SPP queue delays, PJM needs to take additional steps. The first step is that PJM should provide more visibility into TO construction delays, and the second step is showing which TOs have scheduled transmission outages to interconnect renewable projects. Where delays are occurring, providing developers the option to build prefabricated substations would reduce the interconnection delays. These two steps would provide an honest assessment of in-service dates for renewable developers and their financial counterparts.